The Bureau of Land Management has proposed a rule that would provide new regulations to ensure that site security and oil & gas are being handled in a proper and secure manner in Federal and Indian oil & gas leases. Some of the changes this rule would entail include updating how Onshore Oil and Gas Order No.3 address changes in technology, as well as identify certain acts of noncompliance that would result in immediate assessment, and set forth a process to consider variances from the requirements of proposed regulations. The BLM believes these proposed changes will enhance its overall production verification and accountability efforts, which will pave the way for new proposed regulations for Order No. 4 and 5 as well.

The BLM is encouraging these updated regulations to be taken seriously, as the magnitude of oil & gas production cannot be taken lightly. Royalties are owed on all production removed or sold from Federal and Indian oil & gas leases, and in fiscal year 2014 alone, onshore Federal oil & gas leases produced about 148 million barrels of oil, 2.48 trillion cubic feet of natural gas, and 2.9 billion gallons of natural gas liquids, with a market value of more than $27 billion, with generated royalties of almost $3.1 billion.

Given the magnitude of the production and royalties, it is critically important that the BLM ensure that operators accurately measure, properly report, and account for that production. The BLM is proposing updates to Order 3’s requirements because they are necessary to reflect changes in oil measurement practices and technology, since Order 3 was first circulated in 1989.

Specifically, this proposed rule is designed to ensure the proper and secure handling of production from Federal and Indian oil & gas leases, which is essential to the accurate measurement, proper reporting, and accountability that are necessary to ensure that the American public, as well as Indian tribes, receive the royalties to which they are entitled on oil & gas produced from Federal and Indian leases. With this rule, the BLM is now proposing to replace Order 3 and update and codify requirements regarding site security.

 

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